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The Internet's Network Efficiencies Are Destroying the Middle Class
Hugh Pickens DOT Com writes "Joe Nocera writes in an op-ed piece in the NYT that the same network efficiencies that have given companies their great advantages are becoming the instrument of our ruin. In the financial services industry, it led to the financial crisis. In the case of a company like Wal-Mart, the adoption of technology to manage its supply chain at first reaped great benefits, but over time it cost competitors and suppliers hundreds of thousands of jobs, thus gradually impoverishing its own customer base. Jaron Lanier says that the digital economy has done as much as any single thing to hollow out the middle class. Take Kodak and Instagram. At its height, 'Kodak employed more than 140,000 people.' Kodak made plenty of mistakes, but look at what is replacing it: 'When Instagram was sold to Facebook for a billion dollars in 2012, it employed only 13 people.' Networks need a great number of people to participate in them to generate significant value says Lanier but when they have them, only a small number of people get paid. This has the net effect of centralizing wealth and limiting overall economic growth. It is Lanier's radical idea that people should get paid whenever their information is used. He envisions a different kind of digital economy, in which creators of content — whether a blog post or a Facebook photograph — would receive micropayments whenever that content was used. 'If Google and Facebook were smart,' says Lanier, 'they would want to enrich their own customers.' So far, he adds, Silicon Valley has made 'the stupid choice' — to grow their businesses at the expense of their own customers. Lanier's message is that it can't last. And it won't."
The micropayments for content idea sounds familiar.
Once upon a time 100% percent of GDP was produced by farmers but rising farming efficiency rendered many farmers unnecessary. Once upon a time the vast majority of the middle classes worked in factories but rising efficiency from automation made many redundant. Once upon a time all administrative tasks where written and calculated by hand by vast numbers of office workers. New forms of economy rise whenever efficiency pushes people out of work. But I can't pretend that I'm not a little worried. Any such new form of economic activity will need time and stability to form.
The billionaires are destroying the middle class, by extracting their wealth; Internet efficiencies are just one means they use to do that. This is, simply put, not inevitable, and if the power structures were different, the Internet would be enriching, not destroying, the middle class.
How to change that, and the end game if it is not changed, are left as exercises for the reader.
because consumers are rarely informed enough to purchase anything other than the least expensive (or most hyped) product.
I think they're plenty informed; I just think they don't care as long as they can get it a few pennies cheaper somewhere else and it fits in with their short-term outlook. In the 70's and 80's the autoworker unions were very militant about buying US-made cars, going so far as to ostracize their fellow workers who owned imports and made them park in lots off site of the factory. In that case you were supposed to spend more on a comparable car because they saw it as an issue that went straight to their job security. However, there was never any qualms about buying other cheaper commodities made in China and other countries. In that case you were "stretching your dollar" (those weren't their jobs) and finding great bargains and being an otherwise wise consumer.
I recall an interview with an airline executive many (20?) years ago. He said they heard and listened to customer complaints about the quality of air travel, in particular leg room. He said they tried all sorts of quality of flight improvements, including putting less seats in the plane, but in the end people made their choices largely on the price of the ticket, so they ended up going back to cramming as many seats in the plane they could.
I'm sorry but you are not exactly correct. In 1975, Kodak invented the device that utilized the CCD chip to ultimately cause its own demise. That device is the digital camera. Kodak was the market leader in digital imaging technology and their position was enhanced by both Apple and Adobe. However, as devices became more prolific and other manufacturer's quality and usability increased, Kodak was unable to capitalize on its own technology. Without a successful next generation product, the decline in the use of film which was their high margin bread and butter is what caused them to seek bankruptcy protection.
May it's time to change full time to 20-32 hours a week with an say min level of say 100K+COL to have someone on NO OT salary.
Maybe also have forced comp time / any use it or lose it use it or lose vacation policy must pay out the lost time as some people can't get the time off and or comp time goes to vacation but the work load is to high to use it all.
The Kodak reference really hit home for me. My father was an immigrant and came to America with little in the way of marketable skills or education. But he worked at Kodak his whole career and made a good salary. They treated him well and even gave him a pension for all his years of hard work. My aunt - his sister - also worked there. You know what her job was? She stuffed little tins of film into little boxes on an assembly line. Not a very exciting job I'm sure but it afforded her a decent middle class lifestyle.
Those jobs are largely gone today, and with it, the opportunity for many people to reach up and join the middle class. Those of us in IT are fortunate to be on the right side of the digital divide. Not everyone is cut out to be a software engineer or a doctor or a Silicon Valley entrepreneur. Who speaks for them?
It used to be only assembly line jobs that were being replaced by cheap overseas labor. Now it's moving up the chain and we're seeing IT jobs being moved to cheaper markets. We've seen it disrupt the careers of Travel Agents, Real Estate Agents and people that sell cars. I think the medical field is next. It won't be long before your annual checkup is done by a Doctor in India via Skype. All in the name of progress....and profits.
I'm closer to retirement than college now so I don't worry about me. I worry about the younger generation and what kind of world we are leaving for them.
As someone who has worked in the logistics industry now for about 10 years, currently pretty much everything about your post is factually incorrect.
iPhones are shipped via ocean cargoships, they are domestically warehoused, and domestically shipped primarily via truck. I know this because my previous employer handled the supply chain logistics and domestic warehousing/staffing for the iPhone.
Also, look to the trade consortiums and trade lobbies for why there are fewer customs inspectors - not electronic/mechanical efficiencies.
Until planes can carry hundreds of shipping containers worth of goods or the number of air routes is vastly increased ocean shipments are going to be vastly less expensive for all but niche markets - .ie seafood is one current market where a majority of product is air shipped.
Kodak died because film is a consumable - you have to continuously buy more as you use it. They weren't late to digital - they invented digital photography with the first working digital camera in the 1970s, and the first digital SLRs in the 1990s when a consumer digital camera had 0.25 MP and cost over $1000. But the digital sensor means you can take almost infinite pictures with a single purchase. Furthermore, the rapid advancements in electronic tech meant that the cost of the sensor quickly plummeted to almost nothing.
This shifted the economic emphasis away from the film/sensor which was Kodak's specialty, and to the camera/optics. Whereas before a casual photographer might spend 50% of his lifetime equipment costs on the camera/lenses and 50% film, he will now spend 100% of his costs on the camera/lenses about 1% of which is the sensor cost. Consequently, companies which specialized in making cameras (Canon, Nikon, Olympus, Sony, etc) or lenses (Canon, Nikon, Zeiss, Tamron, Tokina, etc) are doing fine. Companies which specialized in making film (Kodak, Polaroid, Fuji) suffered greatly. Fuji only managed to survive because they branched out into making point and shoot cameras in the closing days of film - they now have a line of half-decent digital cameras. Kodak used to make cameras but pretty much gave up after the disc camera. Their most successful camera in the last half century was the disposable camera - not much need for that in the digital age. Polaroid's camera was entirely a delivery system for their instant film.
For a while Kodak was hanging on with sales of movie film. But their number was up when movies finally made the transition to digital.